Two firms A and B manufacture video game consoles. Firm A's console is less tech- nologically advanced than that of firm B, and firm A knows that if consumers get to choose between both consoles at the same time, they would choose the console of firm B. Therefore, firm A's only chance to sell a large number of consoles is to release it at a different time than firm B. Firm B prefers to release the console at the same time as firm A to benefit from the hype and blog reviews. Suppose first that the firms have to commit to a release date in advance. Firms can choose to release the console either in October or in December. Therefore, while the game has some dynamic aspect, we can think of the choice of the release date as a simultaneous move game, represented by the payoff matrix below. A \ B October October December (100, 50) (10, 100) (10, 100)| December (50, 50) 1) What are the pure strategy Nash Equilibria of this game (if any)? Explain carefully.

Two firms A and B manufacture video game consoles. Firm A's console is less tech- nologically advanced than that of firm B, and firm A knows that if consumers get to choose between both consoles at the same time, they would choose the console of firm B. Therefore, firm A's only chance to sell a large number of consoles is to release it at a different time than firm B. Firm B prefers to release the console at the same time as firm A to benefit from the hype and blog reviews. Suppose first that the firms have to commit to a release date in advance. Firms can choose to release the console either in October or in December. Therefore, while the game has some dynamic aspect, we can think of the choice of the release date as a simultaneous move game, represented by the payoff matrix below. A \ B October October December (100, 50) (10, 100) (10, 100)| December (50, 50) 1) What are the pure strategy Nash Equilibria of this game (if any)? Explain carefully.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Two firms A and B manufacture video game consoles. Firm A's console is less tech- nologically advanced than that of firm B, and firm A knows that if consumers get to choose between both consoles at the same time, they would choose the console of firm B. Therefore, firm A's only chance to sell a large number of consoles is to release it at a different time than firm B. Firm B prefers to release the console at the same time as firm A to benefit from the hype and blog reviews. Suppose first that the firms have to commit to a release date in advance. Firms can choose to release the console either in October or in December. Therefore, while the game has some dynamic aspect, we can think of the choice of the release date as a simultaneous move game, represented by the payoff matrix below. AB October October (10, 100) December (50, 50) December (100, 50) (10, 100) 1) What are the pure strategy Nash Equilibria of this game (if any)? Explain carefully.
There are two firms in the market (duopoly). These two firms are competingsimultaneously. The first firm chooses its output level (x) by predicting the second firm’soutput (y). Let c denote the total cost function c(x) = x and c(y) = y. Also, let’s assumethat the inverse demand function is p(Y) = 7 - Y where Y = x + y. (1) Obtain the reactionfunction of the first firm. (2) Find the equilibrium (output and profit of each firm) whentwo firms simultaneously compete
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